Midday Markets: The one tax you could bank on

The Midday Market report from City AM reveals that Labour's upcoming Budget is expected to include a windfall tax on the banking sector. Former Manchester United footballer Gary Neville likened the appointment of Jose Mourinho as Chelsea's head coach in 2016 to this potential tax, stating it was inevitable. Despite Mourinho's brief tenure, Neville's analogy could apply to the speculation surrounding the Budget.

Labour's John Healey has been tight-lipped about the composition of his first fiscal event, but it appears that a windfall tax on the City's banking sector is imminent. Healey is considering reversing Jeremy Hunt's reduction of the bank surcharge and possibly overhauling how the Treasury treats Bank of England's interest payments on commercial bank reserves.

This tax is anticipated to generate billions of pounds for the government. However, despite lobbying efforts from banking executives, it seems banks are resigned to the tax. Lenders have reported modest share price movements following the news, indicating a sense of resignation. Critics argue that a windfall tax on banks is not a good policy, as it could harm the UK's economy by reducing the funds available for small and medium-sized enterprises.

Moreover, the tax is seen as a reflection of UK policymakers' growing mindset towards taxing the success of cyclical businesses, akin to energy firms or airlines.